Barely three days after announcing a planned divestment from of its Nigerian operation, Shoprite Holdings has informed workers’ union in Kenya that it will be laying off 115 staff effective August 31, 2020.
The job cuts follow the closure of City Mall branch in Nyali, Mombasa, the second branch to be closed in Kenya within a period of five months. Shoprite has cited reduced patronage for its decision to close down the outlets.
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According to a report, Shoprite sent a notice to the Kenya Union of Commercial Food and Allied Workers (KUCFW). Part of the notice said:
“Endeavour to continue trading at the Nyali branch is no longer viable. Financial and other data will be provided and discussed at a proposed meeting. It is contemplated that the intended date of termination on account of redundancy will be August 31, 2020. There are currently 115 persons employed at the branch of which 92 are members of KUCFW.”
More details: Earlier in April, Shoprite had also closed Karen Branch, Nairobi, laying off no less than 104 workers in the process. These closures will most likely constrain Shoprite’s expansion efforts across the East African country.
Nairametrics understands that Shoprite opened operations in Kenya back in 2018, with hopes of taking advantage of the country’s disorganised retail sector. Unfortunately for Shoprite, it has recently had to combat increased competition from cash-rich retailers such as Naivas and Carrefour.
Note that other smaller competitors in the country have also had to close branches due to lack of profitability.
Meanwhile, Shoprite recently had to deal with a lawsuit from the billionaire Muguku family, which owns Waterfront Mall. The Muguku family was seeking Sh520 million in lost rent after the retail chain cut short its tenancy at the mall.
The Backstory: The retail giant announced on Monday that it will divest from its business operations in countries outside South Africa, due to low profitability. An internal memo sent to its staff in Nigeria on July 31, 2020, disclosed that the new owners of the Nigerian subsidiary will work with the management to drive the expansion plans in Nigeria.
The company has been reviewing its long-term options in Africa after currency devaluations, supply issues, and low consumer spending in Angola, Nigeria, and Zambia began to weigh on earnings.
There are speculations and fears that this new move in Nigeria could result in job cuts, especially if the new owners decide to make adjustments to the business model.